Exam 1

Question 1

Supply chain consists of multiple types of flow, name the 3

Answer 1

information, product, and financial

Question 2

Stages of a supply chain:

Answer 2

supplier, manufacturer, distributor, retailer, custome

Question 3

why are supply chain decisions important

Answer 3

Competitiveness requires an ability to adapt to changing technology and customer needs and desires

Question 4

what is the objective of a supply chain

Answer 4

to maximize the overall value

Question 5

what is a performance measure for a supply chain

Answer 5

return on investment = (net profit)/(net assets)

Question 6

In a supply chain what affects net profit (numerator)

Answer 6

product sales, overhead, direct labor, freight, taxes and customs

Question 7

in a supply chain what affects net assets

Answer 7

inventory

Question 8

the stock of any item in an organization

Answer 8

inventory

Question 9

a specific unit of stock to be controlled in an inventory system

Answer 9

stock-keeping unit

Question 10

When a supplier sets up a production line or a
distributor makes a shipment or a customer makes a
purchase, there is typically a fixed cost associated
with the setup or the shipment or the purchase.
Hence, the production or shipment or purchase lot
size can be larger than the immediate demand and
what is not immediately needed is kept in inventory.

Answer 10

economies of scale

Question 11

if a supply shortage or a price increase is anticipated, then inventory can be kept

Answer 11

speculation

Question 12

In such cases, the supplier starts production
before the planned release date and builds inventory
to meet the demand at product launch

Answer 12

smoothing

Question 13

procurement

Answer 13

what you pay to procure the item

Question 14

is the time the duration that elapses between the time when the procurement/production order is placed until when the order is received

Answer 14

lead time

Question 15

dictates how frequently the inventory status is checked

Answer 15

inventory review scheme

Question 16

MA: the inventory level is reviewed on a blank a basis

Answer 16

continuous

Question 17

the planning horizon is blank and the demand parameter will continue to be at the blank value throughout this planning horizon

Answer 17

infinite, same

Question 18

the demand rate is blank and blank, and arrives at a blank rate over time

Answer 18

known, continuous, constant

Question 19

although the item of interest can be an item in a larger inventory system, it is treated entirely independently of other items

Answer 19

single item

Question 20

the blank parameters do not change over time. in particular, inflation rate is low

Answer 20

cost

Question 21

the unit variable purchase cost is blank and does not depend on order quantity

Answer 21

constant

Question 22

the order delivery lead time is blank

Answer 22

zero

Question 23

no blank are allowed, the demand must be satisfied

Answer 23

shortages

Question 24

Trade-off between the fixed order cost and variable inventory holding cost

Answer 24

EOQ

Question 25

lambda

Answer 25

demand rate (units/unit time)

Question 26

K

Answer 26

fixed order cost ($/order0

Question 27

c

Answer 27

unit variable purchase cost ($/unit)

Question 28

h

Answer 28

unit inventory holding cost ($/unit/unit time)

Question 29

q

Answer 29

order quantity (units)

Question 30

T

Answer 30

length of the inventory cycle (unit time)

Question 31

C(q)

Answer 31

average total cost per unit time ($/unit time)

Question 32

(total cost per cycle)/(cycle length)

Answer 32

C(q)

Question 33

when you take the first derivative of C(q), what do you get

Answer 33

annual ordering cost = annual inv. holding cost

Question 34

the reflection of the firm's capabiltiy to contribute to the wealth of its shareholders by paying dividends

Answer 34

shareholder value

Question 35

what are the 2 types of fixed cost that a company can incur

Answer 35

ordering cost or setup cost

Question 36

Why might a company order from the supplier in bulk

Answer 36

the order cost is incurred regardless of the size of the order. Therefore, it may be more economical to order a large number of items in each order cycle

Question 37

includes all the expenses associated with placing an order

Answer 37

procurement costs

Question 38

demand is know with certainty

Answer 38

deterministic

Question 39

demand has uncertainties associated with it

Answer 39

stochastic

Question 40

2 problems when there is excess demand

Answer 40

back orders and lost of sales

Question 41

the time that elapses from the time at which we receive q units until the time the inventory level drops to zero and we order and receive q units again

Answer 41

inventory cycle

Question 42

formula to determine the length of an inventory cycle

Answer 42

T=q/lambda

Question 43

what are three costs incurred in the total cost per inventory cycle

Answer 43

Ordering cost, inventory purchasing cost, inventory holding cost

Question 44

since the entire demand has to satisfied, this term corresponds to the cost of doing business. Independent of the inventory policy, the purchasing cost for the entire demand lambda has to be incurred

Answer 44

c times lambda

Question 45

Suppose it takes 2 days for the order to be processed and 1 day for the coffee beans to be delivered from Atlanta to Gainesville. How does this change the EOQ model?

Answer 45

if the assumption that the entire demand must be satisfied holds, then an order must be placed at a specific time to ensure the arrival of the order in a timely manner

Question 46

What would happen if the price of the coffee beans changed with order size?

Answer 46

Since the basic EOQ model relies on the assumption that the unit cost does not change with the order size, this aspect has to be taken into account explicitly.

Question 47

Suppose that the store managers also order packaged baked goods (such as biscotti) and other items (such as Starbucks coffee mugs) from the distribution center. Is there a benefit in combining the coffee bean orders with these orders?

Answer 47

The basic EOQ model relies on the basic assumption that the entire fixed ordering cost is associated with the item of interest. In several practical settings, however, multiple items may share the fixed cost

Question 48

When is an EOQ value realizable?

Answer 48

Consider a value of the unit procurement cost with the corresponding price- break points. If the EOQ value that corresponds to this particular procurement cost fals between the price-break points within which the unit procurement cost is valid, then the EOQ value is realizable

Question 49

if the order size exceeds the break-point quantity then the discount rate is applied to all units of the order

Answer 49

All units discount

Question 50

if the order size exceeds the break-point quantity then the discount rate is applied only to those units that are beyond the breakpoint

Answer 50

incremental discount

Question 51

the order quantity obtained under a finite replenishment rate is also referred to as

Answer 51

the economic production quantity

Question 52

what is the main difference when the replenishment rate is finite

Answer 52

when the replenishment rate is finite, we do not receive q units immediately

Question 53

What is the sweetspot in an EOQ model

Answer 53

where the average total cost per unit time is minimized

Question 54

if the demand during lead time is less than quantity

Answer 54

an order has to be placed in the previous period

Question 55

if the demand during lead time is greater than the quantity

Answer 55

an order has to be placed several previous period ahead